9 Long Term Stock Ideas

Posted by Iain Butler - Chief Investment Adviser - Motley Fool Canada

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Sell in May and go away?

We Fools know to ignore such nonsense. For those of us looking to accumulate wealth by investing in equities for the long term, May is just as good as any other month to put our hard-earned savings to work.

In our members-only Stock Advisor Canada service, we’re not taking the summer off. In fact, in less than one week (next Wednesday, May 14), we will release our next two official stock recommendations.

The two fully vetted companies that are on tap, one Canadian- and one U.S.-listed, represent the best ideas for new money that our team of four Stock Advisor Canada analysts have right now. 

If you want access to these two brand-new ideas, and the 14 recommendations we’ve brought our subscribers thus far, as well as a plethora of other tools that make this much more than just a “stock-picking service,” click here now to be taken to our sign-up page.

To help tide you over until next week’s release, this week’s Take Stock is dedicated to ensuring that you saw the recent collection of stock ideas put forward by our team of Fool.ca contributors. We asked the team to pick their favourite Canadian stock ideas right now. Here’s what they came up with:

Robert Baillieul: Inter Pipelines (TSX: IPL)

I doubt you’ve heard of this company. Though it’s not a consumer-facing name, this stock might become one of your favourite names on this list.

Inter Pipeline operates 6,400 kilometres of oil and gas pipelines as well as several massive storage facilities in Western Canada and Europe. We love these types of assets here at The Motley Fool because they tend to have long lives and face limited competition. Once built, they can be like a toll road, generating steady profits year after year, which, generally speaking, can allow a company to return ample cash to shareholders in the form of dividends.

Today the stock yields 4.3% and has increased its payout 10 times over the past decade. And in my view, thanks to Alberta’s booming oil production, investors should be able to count on more dividend hikes for decades to come.

Fool contributor Robert Baillieul has no positions in any of the stocks mentioned in this article.


Benjamin Sinclair: MEG Energy (TSX: MEG)

MEG Energy is a pure-play heavy oil producer in Alberta. The company’s production, and most immediate growth prospects, come from Christina Lake, which I believe to be a very high-quality asset. As a result, MEG is one of the industry’s lowest-cost producers, with net operating costs of only $10 per barrel.

MEG is growing aggressively, with plans to more than double 2013’s daily production by 2015. With what I believe to be such a quality asset, MEG’s high growth should create tremendous value for shareholders, especially if transportation bottlenecks continue to weaken. As a bonus, MEG trades at only 1.05 times the present value of its proved reserves.

Fool contributor Benjamin Sinclair owns shares of MEG Energy.


Neha Chamaria: PotashCorp (TSX: POT)(NYSE: POT)

PotashCorp’s recently released first-quarter numbers and outlook should be enough to pique any investor’s interest now.

The company’s Q1 numbers not only beat Street estimates, but the company also improved its guidance for 2014, encouraged by improving fertilizer market fundamentals. PotashCorp’s order flow into the second quarter remains strong, with the U.S. spring planting in progress and the Brazilian season nearing. Meanwhile, PotashCorp is also on track to cut potash costs by $15-$20 a tonne this year, which should further boost margins.

PotashCorp increased its quarterly dividend by 25% in 2013, and its stock currently sports a juicy dividend yield of 3.6%. Given that the company generated greater free cash flow year over year in the first quarter, I’m not ruling out another dividend hike.

These factors, coupled with rumours of BHP Billiton eyeing PotashCorp yet again, should encourage investors to watch the fertilizer stock closely.

Fool contributor Neha Chamaria does not own shares in any of the companies mentioned at this time. The Motley Fool owns shares of PotashCorp.


Matt Smith: Parex Resources (TSX: PXT)

My top stock idea this month is small-cap oil explorer and producer Parex Resources, which operates predominantly in Colombia. Over the last year the company’s share price has spiked a massive 158%, but despite this significant gain I believe there are a range of catalysts that could drive its share price higher.

The company is targeting significant growth in oil reserves and production through an aggressive acquisition program. Coupled with solid organic oil production, I believe these moves should significantly boost Parex’s financial performance.

First-quarter 2014 oil production was a record 18,245 barrels daily, a healthy 7% increase quarter-over-quarter and a massive 28% year-over-year. Second-quarter 2014 production is expected to grow 3% to 6% compared to the first quarter, which is 19,000 to 19,500 barrels of crude daily.

With Parex’s oil pricing benchmarked to Brent, any significant growth in crude production should continue to boost its financial performance and ultimately, in my view, its share price.

Fool contributor Matt Smith does not own shares in any of the companies mentioned. 


Karen Thomas: Nuvista (TSX: NVA)

In my view, Nuvista is in a very attractive spot right now, experiencing accelerating netbacks along with low-risk, repeatable increases in production. Nuvista’s focus on natural gas is working for the company at this time, as natural gas prices have been strengthening. With natural gas inventory levels 50% lower than the five-year average, this trend should continue to strengthen.

Nuvista is focusing on the Montney in Alberta for its superior economics and in response to the strength in natural gas liquids pricing. The economics of this area look quite attractive. Nuvista has seen average internal rates of return of over 50% in this area.

Looking ahead, the company is confident that it will achieve overall annual production growth of 25% through 2015, and is spending in order to expand its infrastructure to ensure that production can access the market.

The company’s balance sheet is healthy, production and cash flow are growing at very strong rates, and with natural gas and natural gas liquids pricing on the rise, I believe the future looks bright.

Fool contributor Karen Thomas owns shares of Nuvista.


Nelson Smith: Empire Company (TSX: EMP.A)

Shares in Empire Company hit a fresh 52-week low in April, selling off in part because of disappointment from Sobey’s quarterly results. The company is experiencing some growing pains from its $5.8 billion acquisition of Safeway’sCanadian operations, which seem to be temporarily keeping the stock down.

Once the company irons out the kinks, I believe it’s positioned to be a true Canadian retail powerhouse. It has already flexed its might with suppliers, stating any prices increases for 2014 wouldn’t be accepted. Even though Sobeys is a true national competitor to Loblaw, it currently trades at a significant discount to its peer. In my view, shares should perform well once results get a little better and investors start warming up to the name.

Fool contributor Nelson Smith does not own shares in Empire Company.


Justin K. Lacey: DIRTT Environmental Solutions (TSX: DRT)

My top stock idea for May is DIRTT Environmental Solutions, a manufacturer of fully customizable interiors for various industries, including corporate, government, education and healthcare.

The key to DIRTT is its proprietary 3D technology software, “ICE,” which it developed to eliminate human error, reduce waste, and provide a more efficient method for designing, constructing and installing building interiors. After a lackluster start to life in the public markets, DIRTT has found its footing, and is up nearly 20% since its IPO in November 2013.

The market opportunity is significant – the U.S. non-residential construction market is estimated at approximately U.S. $570 billion. But with this small-cap stock, investors should expect a high degree of volatility as well.

Fool contributor Justin K. Lacey owns shares in DIRTT.


Matt DiLallo: Brookfield Property Partners (TSX: BPY.UN)(NYSE: BPY)

I believe Brookfield Property Partners offers investors a compelling combination of income and value. The global real estate owner pays a very generous distribution of more than 5%. On top of that the units are selling for a discount of about 20% below the net value of the company’s real estate assets.

That combination of income and value, when combined with the company’s organic growth opportunities just within its current portfolio, should yield above-average long-term returns. In fact, Brookfield Property Partners is confident that it can organically grow its value by 20% annually through 2018.

Add the company’s long history of accretive acquisitions and, in my view, Brookfield Property Partners is the one Canadian real estate company to buy.

Fool contributor Matt DiLallo owns shares of Brookfield Property Partners. 


Michael Ugulini: Peyto Exploration & Development (TSX: PEY)

Peyto Exploration & Development engages in the exploration and development of high-quality gas properties. It is a producer of unconventional natural gas in the Deep Basin of Alberta.

I’ve held shares in Peyto for almost 10 years now. As an income investor I like the regular monthly dividends. In mid-April, Peyto confirmed dividends for the second quarter of 8 cents per common share for the record dates of April 30, May 31, and June 30, 2014.

Regarding its assets in its geographically focused core areas, 97% are processed by the company and 99% are operated by Peyto. The company has a 97% interest in nine processing facilities. It has 425,000 net acres and 900-plus producing zones in these core areas.

Fool contributor Michael Ugulini owns shares of Peyto Exploration & Development.


The Foolish Bottom Line

Many thanks to our contributors for putting forward this diverse collection of ideas!

If you’re thirsty for more ideas, this is just the tip of the iceberg. When you become a Stock Advisor Canada member, you’ll get two, fully researched stock ideas per month (one from the Canadian market and one from the U.S.), delivered to your inbox every month.

And as I mentioned, this is more than just a “stock-picking” service. In addition to these stock recommendations, our members also receive Weekly Updates that keeps them up to speed on all our scorecard companies, access to our members-only Discussion Boards, the ability to participate in our online analyst Town Hall live chats, and more. For more information on how to sign up, see the ad below. Can’t wait to have you on board!


Iain Butler
Chief Investment Adviser
Motley Fool Canada

P.S. Don’t miss out  — next Wednesday, our premium Stock Advisor Canada service is publishing our #1 TSX and #1 U.S.-listed stock for new money! Right now, you can sign up to join Stock Advisor Canada and pay just $99 — a rate 67% OFF the usual retail price ($299). To get started, click here now.